Palace to monitor compliance of oil firms, traders

MANILA, Philippines – Malacañang will closely monitor oil firms and traders to check their compliance with the conditions set by President Arroyo last week in exchange for lifting price caps on petroleum products and other basic commodities effective tomorrow, officials said yesterday.

Executive Secretary Eduardo Ermita issued the warning after Mrs. Arroyo announced on Friday that she is revoking Executive Order 839, which froze prices of petroleum products to Oct. 15 levels, and removing price controls on basic commodities following an emergency meeting at the Palace with representatives of oil firms, various industries and business groups.

“They (oil firms, manufacturers and retailers) have to be true to their word not for the government but for the people who are still trying to recover from the recent calamities,” Ermita said in a telephone interview.

He said the Department of Justice has the legal tools it can use to check runaway prices of fuel and consumer goods.

During the meeting, Mrs. Arroyo asked the oil firms to agree first to certain conditions before she would revoke EO 839. There are fears that once the EO is lifted, oil firms would jack up their prices significantly.

First, the oil firms must provide some form of subsidy or discount in selected areas, particularly those hard hit by recent natural calamities. The companies should also recover their reported losses or adjust to changes in global crude prices on a staggered basis, and they should also increase their investments in the country to spur economic activity and create jobs.

Trade Secretary Peter Favila, who chairs the National Price Coordinating Council, also announced that price controls on basic and prime commodities would be removed effective Monday.

The move also came with conditions. First, there should be adequate supply and reasonable pricing of commodities; and there should be no hoarding and no profiteering.

“There should be discipline within the market, and for businesses to police their own ranks and help the government in monitoring the behavior of these prices,” Favila said.

He said he would not hesitate to re-impose the price controls if the conditions are not met and retailers overprice their goods.

Among the goods covered by price controls – imposed following the declaration of a state of calamity last month – are rice, canned sardines, fresh pork, poultry meat, fresh eggs, processed milk, luncheon meat, corned beef, meatloaf, flour, vinegar, soy sauce, fish sauce, candles, soap, construction materials including hollow blocks and cement, and funeral services.

No pressure

Favila yesterday said the government did not give in to pressure to lift the price controls on basic and prime goods and commodities, including petroleum products.

Speaking with reporters in Singapore, Favila said that the government did what had to be done to respond to the calamity brought about by the storms that hit most of Luzon last month and it ended up helping a lot of people.

However, in spite of the good intentions of the government, the move to put a cap on prices of basic and prime goods and commodities generated strong criticism from the private sector, specifically the oil companies and various business organizations.

Favila emphasized that the government was not pressured by the oil companies to lift the price freeze and even challenged critics of the administration to tell the public what solutions they had to address the problems faced by the consumers after the storms.

Favila explained that the oil companies were not after recovering their losses from the price freeze but were only after minimizing these losses.

He said that the government expects the oil firms to fulfill their end of the bargain to implement a staggered increase in their prices once EO 839 is lifted tomorrow.

If any of the oil companies insist on implementing a one-time big-time increase in their prices, then Favila reiterated the government will not hesitate to re-impose the price freeze.

On the proposal of the transport sector for the government to provide them with a facility that would allow them to directly import finished petroleum products, Favila said this would have to be studied very carefully.

Business as usual

Pilipinas Shell Petroleum, one of the country’s oil refiners, expects it would be “business as usual” for the oil industry after EO 839 is lifted.

“We look forward to a continuing stable policy environment in which to conduct business successfully,” Edgar Chua, Shell chairman and president, said.

Chua said the decision to lift the EO was a welcome development, especially to the investor community.

“This sends a positive signal to both the local and international business communities,” he said.

According to Chua, the lifting of the EO will allow oil industry players to continue with their respective businesses in a deregulated environment.            – –Paolo Romero (The Philippine Star) with Marvin Sy, Donnabelle Gatdula, Aurea Calica